Peer-to-peer lending is probably one of the most exciting innovation in digital finance. The principle inspires not only me, but many other people around the world. While the peer-to-peer lending in Germany is still a marginal phenomenon, has already developed a large market in the US. This has institutional investors also can be monitored that go now with a lot of money in the business. Can this still be called "peers", ie as equals?
Peer-to-peer lending brings some benefits for borrowers
The P2P lending has proven to be major growth industry in recent years. While it is still somewhat restrained approached the credit marketplaces in the US and England a few years ago, some credit marketplaces have now recorded several hundred percent growth.The most prominent example is probably the credit marketplace Lending Club from the US.
The large growth of the industry can be explained by the practical benefits of the principle. P2P lending is an innovation that has sprung digitization and offers some advantages over other investments and ways to get on alternative routes for a loan. A large cost advantage of credit marketplaces over traditional banks are the lean structures.
Credit marketplaces have no branches and much less administrative expenses and employees than regular banks. This enables them to meet the demand for small loans profitable. For large banks, the administrative burden is often in no matching relation to the loan amount. They therefore avoid to forgive too many small loans (like not at all). An exception are overdraft facilities. Here are usually very high interest rates and the administrative burden is less, since in most cases only the original grant of the planning framework requires a greater effort.
This all transactions are handled online, cost advantages can pass on to borrowers and the demand for small loans are served .. Borrowers then pay often less interest than usual (not always). The intended use also usually does not affect the decision of whether the loan is granted or not, with financial marketplaces typically include only the financial circumstances. An Examining conversation at your own bank is not necessary here decides the market place and the "crowd".
Particularly small and medium-sized enterprises (SMEs) can benefit from credit marketplaces. Many SMEs are suffering as a result of the financial crisis undercapitalised, but the new loan marketplaces offer an alternative. Particularly small businesses find it difficult to convince the banks of their credit rating. This is quite harmful to our economy, because grade SMEs, which account for approximately 99.6% of all companies in Germany, need for growth capital from outside. Thus we see that the settlement through a credit marketplace may well make sense.
A new asset class
The greatest innovation in P2P lending is probably on the investor side. Private investors have the opportunity to invest directly and uncomplicated way in personal and business loans through the creation of the credit market places for the first time. Benefits at this investment are comparatively high returns while planning the investment. As the credit marketplaces pretend usually the interest rates on the basis of a credit rating, the investor must theoretically just click and watch how increased his money to "invest". Qua non, of course, is that the credit marketplace, the default risk correctly assessed and determined the rate correctly. Of course, also to be noted is the right diversification of investment portfolios.
Peer = owner?
But the credit market places are not only open to private investors.Institutional investors have the opportunity to invest on credit marketplaces. At least in America and England, the institutional investors those who finance a large part of the loans. On the largest credit marketplace in the world, the American "Lending Club" fund this even more than two-thirds of all loans. The ever almost institutional economics blogger Dirk Elsner wrote recently:
At the conference " financial services provider of next-generation" last Wednesday in Hamburg, I heard that P2P pioneer Smava, the German now boosting lending via institutional funds. This would give the far more subdued growth has significantly accelerated its (exact information, but I have not yet found). The Financial Times reported that Santander and Black Rock at the first private securitization of peer-to-peer loans operate on the basis of loans from Lending Club and Prosper (Details: FT.com Santander and BlackRock work on first rated P2P securitisations )(Link to article: P2P Lending - Bald quite large and for investment professionals?)
Through this capital glut of major investors, the credit marketplaces faced a problem. What to do with all that money? Logically, these institutional investors also different work as amateur investors.Frequently "Lending Robots" (also called "Loan filter") self-programmed by these large investors are used software that can automatically invested and after own criteria on the platform. By using a lending Robots can be when properly adjusted better returns than the average achieved. is filtered, for example by location, age, family situation or income. This can make sure that you invest only in loans with the best ratio of interest rate and probability of default. This effect / ratio also "arbitrage" is called.
The problem that now arises, however, is that the institutional investors by big capital and Softwareinsatz usually a few seconds faster than the average investor. So private investors often have difficulty to get to loans with the appropriate criteria, because their number is usually limited!. Institutional investors snatch the private investors quasi already the best loans from under the nose before the ever have time and opportunity to invest. Nav Athwal recently told Forbes magazine even the end of the peer-to-peer lending ahead. So far but it is in my opinion not come.
Why institutional investors are not harmful
Although institutional investors are often a little faster than others, but also private investors the use of a lending Robots / credit filter is not denied. There are numerous offers, the best known are probably the original lending Robot or nickel SteamRoller . These filters Search programs based on statistical data of a credit marketplace the best conditions for a high arbitrage and invest in credit projects that meet the selection criteria. This of course requires that the private investors dealt with the issue and incorporating, something for which not everyone has enough time or inclination. However, who is working with a Robot Lending should have plenty of opportunities to invest in the best loans. In Germany there is no external filtering software available.
Because institutional investors also bring good with it. Through them, borrowers have to get financed their credit in a short time a much better chance. Also there who do not want to deal with incoming investment and therefore prefer to give the task to a fund or consultant many people. Here funds may in P2P lending invest in high-yield alternative to traditional funds offer, despite the administrative fees.
The question you have to ask yourself is also the importance of the private investors the competitive advantage. Whether you make now 8% or 9% return, may not be as important as an investment professional for a private investor. Personally I can give less satisfied with one percent me if I always get more than eight times more interest on my savings account. Prerequisite is of course that the credit marketplace determines the creditworthiness of borrowers taken accurately and investors diversified in its investment portfolio. What still needs to be respected is that everyone can see the same information and use your own software so that institutional investors are not unilaterally preferred.
therefore I do not see, despite the great influence of institutional investors, the self-dissolution of the peer-to-peer Lendings. On the contrary, P2P loans are an innovative investment for everyone.Whether one invested with or without lending Robot, creates itself or can invest a fund - P2P lending remain just in times of mini and penalty interest an attractive investment for private investors as well as professionals. Institutional investors do the principle of no harm.As a small compromise, you could rename the "peer-to-peer lending" yes "Marketplace Lending".